Apple and Google are winning big, but one company is about to pull ahead
Apple Inc. and Google-parent
Alphabet Inc. have each managed to make copious sets of obscene amounts of
money in any environment — pandemic or not. But the paths for the two
technology behemoths may start to diverge later this year.
Both companies reported blowout numbers late Tuesday that far
exceeded Wall Street expectations. Apple posted
adjusted earnings per share of $1.30, compared with an average analyst estimate
of $1.01, resulting in a quarterly profit of $21.7 billion for the three months
ended in June. Likewise, Alphabet generated earnings per share of $27.26, ahead
of the $19.35 consensus, while generating net income of $18.5 billion for its
second quarter. Shares of Apple fell
in after-hours trading, while Alphabet’s stock climbed.
There’s a logic behind the reactions. No two tech giants are the
same, and it comes down to their business models.
Take Apple. For all the talk about its software-and-services
businesses, the company’s foundation still relies on the iPhone. Despite the
strong sales results for this quarter, investors are already looking toward how
its next smartphone lineup will do. The problem is, there may be little reason
to upgrade. Earlier this month, Bloomberg News reported
that Apple plans to launch four models in September with minor feature
improvements and similar designs to last year’s. If true, it will be a big
letdown compared with the current iPhone 12 lineup, which was the first from
Apple with faster fifth-generation wireless capabilities.
And then there are the supply-chain complications. For the second
quarter in a row, Apple executives said component shortages will hurt its
results. The uncertainty around next year may already be contributing to the
shares’ underperformance this year.
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